Stochastic Oscillator was developed by George C. Lane. Stochastic is a momentum indicator that is able to help PAMM trader or PAMM manager in finding the correct momentum to determine entry point. Now, we will call this Stochastic Oscillator with the name ‘Stochastic’ instead of calling its full name, okay? Well, because this indicator is easily understandable and also easy to use, many traders like to use it in their trading. Using it with a good method, will also give a consistent profit to them.
Stochastic is an oscillator indicator which is designed to measure market saturation. Different from the other oscillator tool like RSI, Stochastic has either buying and selling signals. It also has two different lines in it: the %K and the %D. It’s generally known in the forex trading that the %K is shown in the blue line, while the %D is shown in the red line. But actually, traders can have their own colors for these lines. The %D is usually shown in a series of a dotted line. As a PAMM trader, you will know how to determine a good momentum for entry point by seeing the crossover between the %K and the %D.
There are two important components in stochastic: overbought and oversold. Overbought is a condition where market price is above 80. While oversold is a condition where the price is below 20. When stochastic is in the overbought area, it usually means a good signal for you to open buy. In the other hand, you may open sell if the stochastic is inside the oversold area.
Stochastic usually works well in the sideways situation. Nevertheless, it doesn’t mean that it will not be suitable to be used in the trending market. Well, when market is in the sideways situation, PAMM traders are still able to use stochastic as their reference. The important thing to do is to determine signal which is moving in line with the current trend. So, as a good forex trader, always remember this advise : buy in the uptrend and sell in the downtrend!
Not only be able to give information about overbought and oversold, stochastic is also suitable to find convergence and divergence. When the stochastic goes upward and the graphic goes downward, added by the presence of a signal which crosses the main line from above, that’s the entry point to open buy. While entry point to open sell is when stochastic goes downward, the graphic goes upward and the signal line is crossing the main line from below. Okay, that’s how to handle situation in trading forex using the stochastic oscillator tool. You may like this tool to help you doing your daily trading in the PAMM.
Happy trading using PAMM investments system !
Don’t forget to read this important article for PAMM trader
1. How to become a PAMM Trader
2. Understanding your Forex Trader Level as PAMM Trader